$295 million class action antitrust settlement vacated

Posted on: July 30th, 2010 by Steve Larson
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The plaintiffs and defendants reached a settlement in a class action lawsuit against De Beers S.A., and several related entities, and the U.S. District Court for the District of New Jersey approved the $295 million settlement.  The complaint alleged that De Beers fixed prices in the market for rough gem-quality diamonds by, among other things, executing output-purchase agreements with competitors, establishing a market-wide cartel to set production limits, and restricting wholesalers from reselling diamonds outside of certain geographic territories.  The first category of plaintiffs, purchasers who brought diamonds directly from De Beers, asserted violations of §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2.  The second category of plaintiffs, those who did not purchase directly from De Beers, such as consumers and jewelry retailers, asserted claims under state antitrust, consumer protection, and unjust enrichment laws of all fifty states and the District of Columbia.  The second category of plaintiffs could only rely on state law as a route to monetary relief because they lack standing to bring a federal antitrust claim for damages under  the Clayton Act.  Illinois Brick Co. v. Illinois, 431 U.S. 720, 735-36.  Some states, like Oregon, have passed statutes called Illinois Brick repealers, which allow indirect purchasers to assert antitrust claims under state law.

The settlement was vacated by the U.S. Court of Appeals for the Third Circuit, because it held that the lower court abused its discretion when it certified a nationwide class of indirect purchasers despite recognizing that some of those plaintiffs would be barred from pursuing such indirect claims under the laws of their own states.  The court suggested that the parties should go back to the district court and seek to limit the class to indirect purchasers in those states that have Illinois Brick repealer statutes.

The case is important, because it demonstrates that it may be difficult to get nationwide indirect purchaser classes certified in the Third Circuit.  Instead, plaintiffs may have to seek certification of classes that include only states with Illinois Brick repealers.  Alternatively, if a claim can be asserted on behalf of a nationwide class asserting the right to recover under one state’s statute, a nationwide class might still be certified.  See In re Warfarin Sodium Antitrust Litig. , 391 F.3d 516 (3rd Cir. 2004).